The subprime lending bust

fly said:
But he said he already HAS the money. I'm just suggesting that he invest that money in an index fund rather than slap it down for a down payment.

A 10.4% return on investment IS the average (since 1927). And the interest write-off is just icing, the real meat in the stock market considering there is a 4% interest difference between the mortgage and the index fund...
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If you buy the right house and put just enough down to get the best rate (and not a penny more), then putting any additional money in other investments is a good idea. What you have to watch is when you start trading up. Not reinvesting the entire profit of one house into the other puts you in a tax liability situation.

But again, getting the right house in a good neighborhood is not the easiest thing to do. Just buying any old house and putting down the minimum so you can invest elsewhere is not a smart thing to do. For example: buying into a new development without the benefit of seeing who is going to buy the other houses is not smart. Buying into an established neighborhood, with good schools, is a good idea. Never buy near mass transit, like commuter trains. The hoods from the city ride out, rob you, and ride back. Don't buy next to a city park or a shopping center. It is better to buy a smaller house with more land versus a bigger house with very little land.

Granted, things run in cycles. But no stock market investment would have delivered the return that my house has in the last 10 years.
 
wonko80 said:
If we did avatars, that ref pic would be hers.
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I've always liked this one for my avatar :fly:

boobrun.gif
 
Dysfunctional said:
If you buy the right house and put just enough down to get the best rate (and not a penny more), then putting any additional money in other investments is a good idea. What you have to watch is when you start trading up. Not reinvesting the entire profit of one house into the other puts you in a tax liability situation.

But again, getting the right house in a good neighborhood is not the easiest thing to do. Just buying any old house and putting down the minimum so you can invest elsewhere is not a smart thing to do. For example: buying into a new development without the benefit of seeing who is going to buy the other houses is not smart. Buying into an established neighborhood, with good schools, is a good idea. Never buy near mass transit, like commuter trains. The hoods from the city ride out, rob you, and ride back. Don't buy next to a city park or a shopping center. It is better to buy a smaller house with more land versus a bigger house with very little land.
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Location, location, location. In that respect, the housing market is no different than the stock market, it can be a gamble.
Granted, things run in cycles. But no stock market investment would have delivered the return that my house has in the last 10 years.
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Don't forget, I'm not saying, "Don't buy the house." Regardless of what you put down on your house, the price went up...
 
fly said:
Location, location, location. In that respect, the housing market is no different than the stock market, it can be a gamble.

Don't forget, I'm not saying, "Don't buy the house." Regardless of what you put down on your house, the price went up...
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I don't think we see things all that differently. But I must add, the stock market has historically been more problematic. Most people don't have the knowledge to cherry picket a single stock on the rise... but they can pick a single house. It is the people with a portfolio of stocks that get hammered. I still see the possibility of another dot.com type bust. The fat cats will jump off and the portfolio types will lose their shirts. Sure, the Enron's went under, but the banks that floated them the money knew what was going on. The banks were taking what was obviously phony collateral on the money.

I have a 401k, but all of it is in fixed income return.
 
Dysfunctional said:
I don't think we see things all that differently. But I must add, the stock market has historically been more problematic. Most people don't have the knowledge to cherry picket a single stock on the rise... but they can pick a single house. It is the people with a portfolio of stocks that get hammered. I still see the possibility of another dot.com type bust. The fat cats will jump off and the portfolio types will lose their shirts. Sure, the Enron's went under, but the banks that floated them the money knew what was going on. The banks were taking what was obviously phony collateral on the money.

I have a 401k, but all of it is in fixed income return.
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Short term, you're right. However, over the long term (10+ years) the stock market has consistently returned ~10%, even during the dot com bust. And I'm not suggesting that someone pick a sweetheart stock, but to simply invest in an S&P index fund, which is what these statistics are based on iirc...
 
HydroSqueegee said:
The one thing that does suck is the PMI since we only put 3k down and financed the 88k.
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WTF? What kind of cardboard box are you living in for 91k???

JPatrick said:
Theyre building houses everywhere down here. I mean literally on every square inch of ground they can find. And theyre all filling up.
No idea where all the damn people are coming from, but theyre moving in.
There are a lot of foreclosures tho.
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It's because foreigners love you Texans so much :heart:

Pandora said:
WTF were they eating at $750 a month? Bologna sandwiches? What kinda dipshit buys a house and can't afford to pay $100 increase in their morgage?! PLUS they had two or three kids!

People are stupid. STUPID! :tard:
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I'll take "Exaggerating to the point of outright lying because you're on TV" for $500, Alex :p

HydroSqueegee said:
But we do have to pay for PMI, which they said can be removed after the 5 year point.
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Assuming it's the same as here, the PMI can be removed when your loan amount is 80% of your house value. Essentially it's the point that the lender feels safe that they can get at least the loan amount back in a foreclosure. 5 years is when you'll pay down your loan principal to 80%.

The other way is for your house to appreciate enough. So using your numbers from above, your house has to appreciate to 110k, or 17.3%. When we move in on Saturday, we'll have about 10-15% free equity in our house due to the appreciation in the last 8 months since the purchase price was set. Based on the market and our development, we may hit that magic 80% and remove the PMI within 6 months of living there.
 
fly said:
Short term, you're right. However, over the long term (10+ years) the stock market has consistently returned ~10%, even during the dot com bust. And I'm not suggesting that someone pick a sweetheart stock, but to simply invest in an S&P index fund, which is what these statistics are based on iirc...
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It's based on DJIA I think, about the same though. You are forgetting something either way, over time money is worth less. Adjusted for inflation, over an 80 year period, it averages just under 2% (google it if you dont believe me) before tax. Real estate stays level with inflation (also googlable).

Index funds arent even that good, havent you ever heard of an 'ETF'?

Psh, real property, if you can afford the upfront expenses is not a 'lose.' It is after all tangible. Even if you cant sell it you can rent it out.
 
Fat Burger said:
WTF? What kind of cardboard box are you living in for 91k???
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the mid west is cheep. Our house is a cape cod with a basement and is only around 1400 sq feet and has a detached garage. We got a good deal on it cause the guy had to get rid of it fast (he needed the equity). But there was plenty of work that needed to be done too. The back yard was overgrown around the edges and one corner of it that took up about 1/5th of the back yard was like a little forest (above ground pool use to be there and proper soil was never put back down). The electrical is still the original 60amp fuse box. The roof will need to be replaced in a few years since the shingles are maxed. The old Japanese Maple out back will need to be cut down real soon. And the basement needs finished. Thats what still needs to be upgraded and or done.

So far we have gotten the house mostly in order. Painted everything, new flooring in the bathroom and kitchen. New sink and toilet in the bathroom. Got most of the brush in the back cleared out and new grass came in nicely. Still lots of things to do.




Assuming it's the same as here, the PMI can be removed when your loan amount is 80% of your house value. Essentially it's the point that the lender feels safe that they can get at least the loan amount back in a foreclosure. 5 years is when you'll pay down your loan principal to 80%.

The other way is for your house to appreciate enough. So using your numbers from above, your house has to appreciate to 110k, or 17.3%. When we move in on Saturday, we'll have about 10-15% free equity in our house due to the appreciation in the last 8 months since the purchase price was set. Based on the market and our development, we may hit that magic 80% and remove the PMI within 6 months of living there.
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thats how it is here, and we'll be at that point at around the 5 year point. By then i may have the place looking decent enough to get appraised again.
 
Jonny_B said:
i'm hoping that they're overbuilding the downtown condo market here. i'd like to get one at a firesale price.
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They are overbuilding cleveland's downtown with condo high rises. Of course no one is buying because of the shittiness that is Cleveland. If you don't mind living in one of the most dangerous cities in the country and not working, you could get a good sale there.
 
HydroSqueegee said:
theres a lot of different uses that 20% could go to, but paying for 1/5th your house up front saves a lot of money over a 15-30 year period.

edit... and PMI for the first 5 years blows for those of us that qualified.
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4% down, no PMI, no points, and 6.45% APR for me for 30 years ;)
 
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